BIR Ruling [DA-055-02]

April 1, 2002 BIR RULING [DA-055-02] International School Manila P.O. Box 1526 MCPO 1255 Makati City Attention: Ms. Lyn Fitzgerald Business and Human Resource Administrator M a d a m : This refers to your letter dated June 6, 2001 requesting exemption from the value-added tax on your purchases of materials and services. It is represented that International School Manila (ISM) being a non-stock, non-profit educational institution, was granted exemption from taxes and duties on all its revenues and assets used actually, directly and exclusively for educational purposes, pursuant to BIR Ruling No. 237-87 dated August 11, 1987. By virtue of said ruling, your interest income on savings and time deposits and annual registration fees were not subjected to withholding tax. However, on your purchases of materials and services, you were charged the 10% VAT; hence, this request for VAT exemption on the premise that since the revenues and assets are used for educational purposes, ISM should be VAT-free on all items and services procured. In reply, please be informed that the 10% VAT is an indirect tax and the amount of tax may be shifted or passed on to the buyer, transferee or lessee of the goods, properties or services ( Sec. 105, NIRC of 1997 ). Once shifted, the VAT forms part of the cost of goods and services purchased ( Phil. Acetylene Co. vs. CIR, CTA Case No. 708, September 17, 1965 ) Since your exemption from taxes and duties as a non-stock, non-profit educational institution does not include exemption from indirect tax, your VAT-registered supplier/s of goods, properties and services can legally pass on to you the 10% VAT as part of the invoice price of your purchases. Accordingly, your request is hereby denied for lack of legal basis. Very truly yours, Commissioner of Internal Revenue By: (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal and Inspection Group